Brazil’s Failure to Auction Road Raises Concern Over Growth Plan

Sept. 16 (Bloomberg) -- Brazil’s failure to attract bidders
for one of two toll-road licenses to be auctioned this week is
raising concerns that President Dilma Rousseff’s infrastructure
plan won’t achieve its aim of igniting growth.

The BR-262 road, scheduled for auction on Sept. 18, drew no
offers by last week’s deadline, according to land transportation
regulator ANTT. The government had raised the rate of return on
this and the BR-050 highway, which had eight bids, to 7.2% from
5.5%.

The main reason for the lack of offers to improve and
operate the BR-262 was that probable legal moves by lawmakers in
the state of Espirito Santo who oppose the toll-road may delay
the start of the license, Transportation Minister Cesar Borges
said in a Sept. 14 interview.

Rousseff’s administration is counting on infrastructure
auctions to boost economic growth, Finance Minister Guido
Mantega said Sept 13. The government plans to attract
investments of 87 billion reais ($38.6 billion) through road and
railroad auctions in the next five years, Borges said. The
economy grew 0.9 percent in 2012 and 2.7 percent in 2011, the
weakest two-year period of growth in more than a decade. The
central bank forecasts the economy will expand 2.7% this year.

“I won’t say the plan will be unsuccessful, but the
absence of bidders signals that the government’s options are
limited and that the challenge is huge,” Andre Perfeito, chief
economist at Gradual Investimentos, said in a Sept. 14 telephone
interview from Rio Grande do Norte. “Brazil doesn’t know how to
market itself.”

No Affect

The lack of bidders to improve and operate BR-262 “doesn’t
affect the government’s expectations regarding growth and
doesn’t affect, by any means, the government’s auction
schedule,” Mantega said in a statement sent to Bloomberg Sept.
14.

The government’s sale of licenses including oil blocks,
power plants, ports and airports, may reach “around half a
trillion reais in investments in the next years,” Mantega told
reporters on Sept. 13, adding that loans from private banks will
be the main source of finance for infrastructure projects.

Investors are suspicious about the government’s motives in
selling state assets to private companies, according to Adriano
Pires, head of the Brazilian Center for Infrastructure, said in
a Sept. 14 interview.

“Today, investors see the plan to auction licenses as a
matter of survival, as an economic need,” Pires said from Rio
de Janeiro. “It won’t work unless they’re convinced that the
government is completely on board with it.”

The government suspended planned auctions of two roads that
were scheduled to be held in January, saying it needed to review
traffic in the area.